State plans to make Blues a tax-paying nonprofit

Blue Cross Blue Shield of Michigan may become a nonprofit mutual insurance company under a new proposal from Gov. Rick Snyder that would force the state's largest insurer to pay about $100 million in taxes each year.

Currently, Blue Cross operates under a 1980 law as the insurer of last resort, which exempts it from state and local taxes and prohibits it from refusing to provide coverage for people with pre-existing conditions. But since the reform law requires all insurers to offer coverage to everyone regardless of pre-existing conditions by 2014, Snyder said the 1980 law is obsolete, reported Michigan Live.

Snyder's plan, which must be approved by both the state legislature and the Blue Cross board of directors, also will streamline the insurer's rate review and approval process to bring it in line with other insurance companies, the Detroit Free Press reported.

"Regulating every company the same makes sense," Daniel Loepp, Blue Cross CEO said in a statement. "Our competitors complain that our tax-exempt status gives us a competitive edge, and we say that our strict regulations give them an edge. The Governor's proposal smoothes out those edges. It makes everyone play by the same rules."

To fulfill the insurer's "social mission," Snyder's plan calls for the insurer to contribute $1.5 billion over the next 18 years to a new and independent nonprofit entity that will fund programs to improve the state's healthcare, The Detroit News reported.

Blue Cross began talking with Snyder's office last year about the proposed overhaul, said Blue Cross spokesperson Andy Hetzel. "It's very much his plan, but it's something we have long sought -- a fair and balanced regulatory system whereby all insurers play by the same rules," he told the Free Press.